Inside Flowers' bid for Hostess' bread business

by World Grain Staff
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IRVING, TEXAS, U.S. — As the stalking horse bidder and likely buyer of the majority of the bread assets of Hostess Brands Inc., Thomasville, Georgia, U.S.-based Flowers Foods, Inc. would pay $355 million in cash (up to $360 million if certain license rights are included in the sale) for the company’s brands, 20 baking plants, 38 depots and other assets.

In a Jan. 11 document filed with the U.S. Bankruptcy Court for the Southern District of New York, Hostess said the 20 plants to be acquired are located in 17 U.S. states in the following cities:

• Birmingham, Alabama

• Sacramento, California

• Denver, Colorado

• Jacksonville and Orlando, Florida.

• Waterloo, Iowa

• Hodgkins and Peoria, Illinois

• Columbus, Indiana

• Lenexa, Kansas

• Alexandria, Louisiana

• Biddeford, Maine

• Boonville, Missouri

• Rocky Mount, North Carolina

• Henderson, Nevada

• Northwood, Ohio

• Tulsa, Oklahoma

• Knoxville and Memphis, Tennessee

• Ogden, Utah

In addition to the plants, Flowers would acquire 38 depots in 15 states: California (2), Colorado (3), Florida (1), Illinois (7), Iowa (1), Maryland (2), Massachusetts (3), Michigan (1), Missouri (6), Nevada (1), New Jersey (1), New York (5), Ohio (2), Pennsylvania (2), and Rhode Island (1).

The sale transaction, which is expected to close no later than April 30, also includes intellectual property associated with the Butternut, Home Pride, Merita, Nature’s Pride and Wonder brands.

According to the purchase agreement, Butternut has been sold out of nine of Hostess’ facilities, with the majority of production and sales attributed to the Peoria, Illinois, and Cincinnati facilities. Home Pride has been sold out of three facilities in Ogden, Utah; Northwood, Ohio; and Denver. Merita has been baked and packaged at Hostess’ plants in Birmingham; Jacksonville and Orlando; Rocky Mount; and Knoxville. Wonder is produced in numerous facilities across the U.S., with the largest bakeries in St. Louis, Missouri and Philadelphia, Pennsylvania. Nature’s Pride has key concentrations in the Great Lakes, California, Mid-south, Northeast and Plains regions.

In signing the purchase agreement as the stalking horse bidder, Flowers has agreed to a "good faith deposit" of 5% of the $360 million purchase price. In the event a competing company outbids Flowers at a proposed Feb. 28 auction, Flowers would be entitled to a breakup fee of $12.6 million (i.e., 3.5% of the $360 million initial cash consideration), according to the purchase agreement.

Hostess said it has sought approval from the U.S. Bankruptcy Court for the Southern District of New York for a Feb. 28 auction with a March 5 hearing to authorize the sale to the highest or otherwise best bidders. A hearing to consider the bid procedures motions is set for Jan. 25. If the process is approved, the stalking horse bids will serve as the opening bid in the Feb. 28 auction.

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